Few people are aware that Iran is currently subjected to not one, but three sets of sanctions imposed by U.S., the United Nations and the European Union, the latter two over concerns about Iran’s civilian nuclear energy program.

Now China, Iran’s largest oil export market, has indicated that it might not wholeheartedly go along with Washington’s dictates. Beijing’s intransigence on the issue has given Washington a most unwelcome diplomatic conundrum, if for no other reason than China now holds more U.S. Treasury bonds (debt) than any other nation.

The first U.S. economic sanctions against Iran were instituted in 1979 in the wake of the hostage crisis, when Washington froze about $ 12 billion in Iranian assets.

Extending Washington's reach, in 1996 U.S. legislation, “The Iran-Libya Sanctions Act” (ILSA) threatened even non-U.S. countries and companies with possible sanctions if they invested more than $ 20 million in developing Iran's energy resources. Renewed in 2001,in September 2006 ILSA was renamed the Iran Sanctions Act (ISA), as Colonel Gaddafi was becoming more diplomatic, leading Libyan sanctions to be lifted, leaving Iran alone in Washington’s economic gun-sights.

ISA is designed to isolate Iran and punish naughty Western companies seeking a foothold in Iran's hydrocarbon sector. Since the 1979 Iranian Revolution it has been a core tenet of U.S. foreign policy to contain the Islamic Republic of Iran, and the sanctions are the most formidable weapon in Washington's arsenal. ISA sanctions have provoked protests, some of whose members note Washington's "double standard" as U.S. foreign policy persistently strives to undercut the Arab League's boycott of Israel while promoting ISA.

In the beginning of 2012, EU foreign ministers agreed to place sanctions on Iranian oil and oil products because of Iran’s non-compliance with the obligations of the Treaty on the Non-Proliferation of Nuclear Weapons and the EU sanctions entered into force on 1 July.

According to the U.S. Energy Information Administration (EIA), Iran's largest export markets are China (543,000 barrels per day), India (341,000 bpd) Japan (251,000 bpd, South Korea (239,000 bpd), Turkey (217,000 bpd), Italy (204,000 bbd), Spain (170,000 bpd) and Greece (158,000 bpd.)

So, how are the sanctions working with Iran’s largest oil export market? According to “China Daily,” China bought more crude from Iran in June than it did on average last year before European Union-imposed sanctions against the Persian Gulf nation went into force on 1 July, with Chinese imports of Iranian oil rising 17 percent from May to 2.6 million metric tons, or about 635,000 barrels a day, according to China’s General Administration of Customs. In contrast, in 2011 China bought 2.3 million tons of crude from Iran on average each month, or about 557,000 barrels per day.

Sanctions have a twofold purpose – first, to punish the transgressor, second, to punish those who break them

So, how is Washington dealing with China’s errant behavior?

On 28 June the U.S. granted China a six month waiver from having to comply with the new restrictions, effectively giving Beijing until the end of the year to support the policy.

The date is significant in that consideration of renewing exemptions falls after the U.S. presidential elections.

It is also significant because it in effect underlines how little real leverage the Obama administration has over China. In the complicated minuet of U.S.-Chinese relations, Beijing holds a trump card – over $ 1 trillion in U.S. Treasury bonds. Should Beijing decide either to stop buying them or unload what they already have, Washington would quickly find itself in uncharted financial waters.

So, the shadow play continues. China is not going to sacrifice its economic growth simply because Washington and Tel Aviv are in a tizzy about Iran’s nuclear program. Washington, on the other hand, must need to be seen as “tough” on Iran, and expect to see both President Barack Obama and presumptive Republican nominee Mitt Romney, about to visit Israel, ratchet up the rhetoric against Iran.

But at the end of the day, as noted above, China holds some very expensive U.S. economic trump cards, which, if they cashed in the chips, could quickly crater the weak U.S. economic recovery.

China is now one of twenty nations that have received exemptions from the sanctions, which were a provision of the National Defense Authorization Act signed into law on 31 December 2011, and the “wriggle” clause is that after a country receives waivers from the sanctions, they can be renewed after 180 days, if the penitent nations show “significant reductions” in their imports of Iranian oil.

Want to bet that in December China’s exemptions are renewed?